Trading has taught me a lot of things, and one of them is being right and wrong simultaneously. A bit confusing, right? Yea, well, I would have said so too. But it all happened like a dream that started with the long hours monitoring a particular trade and waiting for it to align with my strategy before making the kill. Still, upon hitting the red button, I made one of the many mistakes every trader dreads.
Recently I came across a quote on social media that said: “a farmer who does not harvest a tuber of yam with patience will spend more time digging up the remains after it is cut in halves”. This quote made me come to the realization that the mistake was self-inflicted. Though I was patient enough, even over the night, I waited and monitored until it entered the kill zone, but when it was time to make the kill, I lost my composure. The rush and anxiety kicked in, and I didn’t check the ‘lot size’ that was used, in a simpler term, I didn’t check the percentage of my capital I was to use in the trade.
After I clicked on the red button, I realized my mistake. I had just staked 10% of my capital on a trade that should have been only 1%. Imagine my reaction after I found out, knowing I could lose about 40% of my capital if the trade went bad. And since it is a market we have no control over, there was still a 30% chance of the trade going bad. Then the questions began to troop in; What can I do to solve this? What is the best way to go? Can’t you turn off your data and sleep it off while the market does its thing? Would you rather exit the trade and cut your losses? The questions kept coming in, and my head was in the abyss at that moment. With fear crippling my mind, doubts about the certainty of the trade began to rise. I was lost, but I needed to find a solution.
I opted to sleep it off, but I couldn’t, my mind wasn’t at peace. I needed to talk to someone, but since I’ve grown fond of talking to myself most times, I had to talk to myself. Although it was a long process, the waters finally became still, and I was in the position to decide without any emotional attachment. By this time, the loss was more than the initial stage (the market doesn’t exactly go the way we want immediately). Thus a harder decision, because in all sincerity it is harder to cut losses, especially when you know you can be right.
I finally decided to stick to my original plan, which was to trade with 1%. Hitherto, the thought didn’t cross my mind, I am more of a risk-taker, and I was willing to take the risk on this trade. But sometimes, it is better to take a loss you see now than a profit that breeds uncertainty. So I cut my losses and took out 9% of the trade, leaving the remaining 1% to run. I wouldn’t say it was the best choice, but that’s what discipline in trading is about, having a plan and sticking to it, albeit the cost.
I paid the price for my mistake. And for this, the goals of the week changed from making a profit to making up for the loss. All this happened on a Monday morning, so I had a lot of mind settling and catching up to do to avoid emotional trading. Personally, it was a great experience as I was put in a position I never imagined, but despite the lessons learned, I never want it reiterated.
And before I forget, the trade ended up being profitable!! Thus making a profit and a loss on the same trade.
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